In this series
Millions of Americans will donate to charity tomorrow for Giving Tuesday, the kickoff of the final weeks to make tax-deductible donations for 2017.
But will the campaign—estimated to garner $175 million this year—continue to boost charitable giving next year? The answer depends on the Republican tax plan now making its way through Congress.
Evangelical leaders have raised concerns that the current reform bills in the House and Senate would reduce the incentives that compel givers to donate to churches and other nonprofits.
Currently, taxpayers must itemize their deductions in order to take advantage of the tax breaks for charitable giving. Since the proposed GOP tax reforms would increase the standard deduction, fewer Americans are expected to itemize as a result—dropping from 30 percent of taxpayers to just 5 percent, according to the congressional Joint Committee on Taxation.
Doubling the standard deduction means 30 million Americans would no longer benefit from a deduction for their charitable giving, a change that is predicted to reduce giving by $13 billion annually, according to Indiana University’s Lilly Family School of Philanthropy.
The drop would hurt ministries and religious nonprofits that rely on tax-free tithes and donations to operate. Dan Busby, president of the Evangelical Council for Financial Accountability (ECFA), previously told CT that the change in the standard deduction stood to make the biggest impact on middle-income taxpayers.
“This is a huge step toward eliminating the benefits and incentives of the charitable deduction altogether,” stated the Faith & Giving Coalition, of which ECFA is a member, in talking points released last week. “It also is a major step toward reversing our nation’s policy favoring and incentivizing charitable giving, which has been working well for over 100 years. This is devastating for our charitable organization and organizations like ours throughout the country.”
Several leaders of evangelical nonprofits have worried about the effects of the proposed standard deduction shift, and have lobbied for greater protections for charitable giving.
“Please pray for your senators who next week will vote on a tax bill that may have a major impact on our economy, our national debt, and on the level of charitable giving to your church and ministries,” wrote National Association of Evangelicals (NAE) president Leith Anderson, urging supporters to contact their senators with concerns that the current bills will “dramatically reduce” the benefit of the charitable deduction.
Both the NAE and ECFA have critiqued the current tax reform bills for their negative impact on charitable giving, and instead are promoting a charitable deduction for givers who do not itemize—as proposed by Republican Senator James Lankford, a Baptist from Oklahoma.
Lankford’s Universal Charitable Giving Act would allow taxpayers who make or give too little to itemize (particularly those in low- and middle-income brackets) to still reduce their taxable income due to their giving. Representative Mark Walker, a North Carolina Republican, has introduced a companion bill in the House.
“This bill will allow Americans to give to the thousands of charitable and faith-based organizations across the country that assist in times of need,” said Lankford. “All Americans should be offered the same incentive and tax benefit to give for what they believe in, not just the wealthy.”
The NAE hopes Lankford’s proposal will be included as an amendment today before sending it to the full Senate for a vote.
“We have a very short window of opportunity to influence this critical decision,” wrote Anderson. “Every senator needs to hear from his or her constituents over this recess week, or at the latest by Monday morning, asking that the Universal Charitable Giving Act be added to the Manager’s Amendment to the tax bill.”
The proportion of Americans who itemize their taxes under the current tax code—nearly a third—were responsible for 60 percent of all donations to charity in 2015.
As CT reported in September:
While a higher standard deduction would likely have “a dampening effect” on giving, it won’t destroy it, said James Bakke, executive director of the Barnabas Foundation, which provides planned giving and stewardship services to Christian organizations. “Most of our donors aren’t motivated primarily by taxes. They’re almost always motivated by the mission of the organization and by doing something good with their money.”
Indeed, one Grey Matter study showed that while 37 percent of Protestant churchgoing donors thought eliminating the deduction would decrease giving by a lot, only 8 percent said it would decrease their own giving by a lot.
People committed to tithing will continue to do it regardless of tax structures, Bakke said. And the 75 percent of taxpayers who already take the standard deduction or who will continue to itemize (even after the raised limits) won’t be affected.
The end of the year has traditionally been a popular time for charitable giving, both due to holiday campaigns and the desire to qualify for tax deductions within the calendar year. This year marks the fifth Giving Tuesday, an annual observance designed to kick off the year-end giving season. Last year, over $177 million was donated to charities online as a part of Giving Tuesday campaigns.
Earlier this year, ECFA found that millennial givers donate more when asked to give a “meaningful” contribution, while older generations respond with bigger checks for a “generous” gift. And evangelicals are making tax-deductible donations to a range of nonprofits; most NAE leaders said in a recent survey that tithing doesn’t have to exclusively go to local congregations. CT’s December cover story focuses on charitable giving, and whether it’s best to give directly to the poor.
CT has previously reported how the new tax plan has generated attention from Christians over its proposed elimination of the adoption tax credit, a change allowing unborn babies to be named as beneficiaries, and the repeal of the Johnson Amendment for churches.
